FINANCIAL INFORMATION - BELAIR BISTRO BELAIR BISTRO . SEGMENTED INFORMATION FOR THE YEAR ENDING 20XX BELAIR BISTRO TOTAL BISTRO CAFE ONLINE/DELIVERY Sales 1,675,250 1,125,000 341,250 209,000 Variable Costs 1,060.500 689,000 D4, 700 166.800 Belair Bistro is a French bistro located in Toronto. The Bistro is essentially made up of a sit-down area Contribution Margin 614,750 436,000 136.550 42 200 37% 39% 20% with service and a daily menu for lunch and dinner while the front of the bistro is a take-out bakery and Fixed Expenses cafe. The manager of the Bistro, Mr. Gabriel, is contemplating some important business decisions for Salaries 276,850 89,250 25.600 12000 1 the bistro and came to you for assistance in determining what costs are relevant to making these Advertising 10,000 7,500 2.500 decisions. Utilities 24,500 18.375 3.675 2.450 Depreciation 55,000 11,250 8,250 5.500 2 Insurance - Building 12.000 9,000 1,800 1.200 2 Manager Salary 70,000 42.000 10.500 17.500 SITUATION I: KEEP OR DROP A PRODUCT / SEGMENT IT Maintenance - Delivery 16,000 16,000 For the past two years, Belair has been operating an online platform through their website that allows 200/400 86,725 (14.950) customers to place orders online and have the food delivered to them within 45 minutes. The orders are then prepared in the same kitchen by the same staff operating the restaurant. The order is then Note I: The Salaries and Advertising expenses are direct and traceable costs of each segment Note 2: These common fixed costs were allocated based on the proportion of the square footage of the delivered by a delivery person with the Belair Bistro motorcycle that was purchased for this segme building occupied by each segment. The Insurance pertains to the building while the depreciation is the total of The online delivery platform ffice located at the back of the restaurant. the depreciation for the building (50%), kitchen equipment (35%) and the motorcycle (10%). Belair's manager, Mr. Gabriel, is considering dropping this segment as he believes it is not profitable. Note 3: Gabriel indicated that he estimates he spends 60%% of his time working at the Bistro, 15%% for the cafe. The maintenance of the IT platform has been expensive, and he also believes that the online orders take and 25% for the online delivery platform. His salary was allocated based on this basis. up a significant portion of his time while making up a small portion of the revenues. Gabriel believes his time could be put to better use with other projects and initiatives for the Bistro as well as managing the current operations. Gabriel indicates that staff turnover has been higher this past year and he feels ADDITIONAL INFORMATION ABOUT THE RESTAURANT & ALLOCATION BASIS: partly responsible as he has not been and coaching the staff. Plan of the restaurant The feedback on the online the platform has been good and he noted that many new customers of the cafe indicated that they discovered the cafe after they saw the website and ordered delivery from the online platform. BACK Gabriel provides you with the following financial information of the Bistro and asks you to help him KITCHEN OFFICE decide whether they should keep or drop the online delivery segment. Additional information about the restaurant and the online delivery segment is provided on the next page. BISTRO REQUIRED: CAFE 1. Identify the relevant costs to the keep or drop decision and prepare a computation of the loss/gain that would result from dropping the online segment. HATS ENTRANCE 2. What qualitative factors would you consider in this decision? As the kitchen is shared between all 3 units, the % of square footage was computed based on the relative proportion of all 3 segments, excluding the kitchen